Kimbell Royalty Partners, LP (NYSE: KRP) today announced the purchase of certain oil and gas royalty assets from certain affiliated sellers for approximately $107.8 million (the “Drop Down”).
Transaction Highlights
- Expected to close on or around December 20, 2018 and be immediately accretive to distributable cash flow per unit
- Includes diversified package of royalty interests with over 70% of production (6:1) from premier resource plays, including the Eagle Ford Shale, Permian Basin, Appalachian Basin and Bakken Formation
- Purchase price is composed of 6.5 million newly issued units in Kimbell Royalty Operating, LLC; further reduces Kimbell’s leverage ratio due to 100% equity used to fund the purchase price
- Adds approximately 1,190 Boe/d of production (6:1)
- Liquids-focused asset base with approximately 80% of revenue from oil and natural gas liquids
- Production mix on a 6:1 basis of approximately 38% oil, 43% natural gas and 19% natural gas liquids
- Adds approximately 16,700 net royalty acres, increasing Kimbell’s total net royalty acre position by 15% to approximately 131,900 net royalty acres across the continental U.S.
- Includes significant upside potential from future development with 59% of total proved PV-8 reserves consisting of proved undeveloped reserves
- Drop down assets have an estimated five-year PDP decline rate of approximately 11%
- Effective date of October 1, 2018, with Kimbell entitled to revenues from production on and after such date
“We are very pleased to announce our first drop down transaction. We believe this large and diversified minerals package not only enhances our existing high-quality portfolio, but also adds significantly to Kimbell’s future distributable cash flow and production,” said Bob Ravnaas, President and Chief Executive Officer of Kimbell’s general partner.
“The drop down assets are predominately located in four of the premier onshore U.S. resource plays, the Eagle Ford Shale, Permian Basin, Appalachian Basin and Bakken Formation. With the majority of the reserves classified as proved undeveloped and the recent active drilling on many of the properties, we are confident that the assets will prove to be a significant driver of growth for the company for years to come. The fact that our contributing parties were willing to accept 100% equity as the purchase price in this transaction demonstrates confidence in the company and allows the company to grow meaningfully without assuming additional debt.”
“This acquisition caps off an extraordinary year for the company. We have announced and completed over $550 million in accretive acquisitions in 2018. In addition, since our IPO in February 2017 and after giving effect to the Drop Down, we have more than doubled our net royalty acreage footprint across the U.S. and more than tripled our daily production in less than two years. I want to thank our team and advisors for their hard work in completing these transactions.”
